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Sunday, October 23, 2016

Global Debt Investors:

The Silence Of The Lambs

Free market economist Danielle DiMartino Booth essay .. "More haunting even than the terrified screams of lambs being led was the silence that followed their slaughter." .. Booth speaks to a world devoid of options for investing in debt .. "The culprit, which too few identify as such, is runaway asset price inflation led by debt markets that have grown to be unfathomably immense in size and scope. At $100 trillion, the size of the global bond market eclipses that of the $64 trillion stock market. A bigger discussion for another day comes from McKinsey data that tell us the worldwide credit market is over $200 trillion in size." .. Booth focuses on the corporate debt market, points out that U.S. firms are more levered today than they were at the precipice of the financial crisis .. quotes Michael Lewitt: "Much of this debt was incurred for unproductive purposes – buybacks, dividends to private equity owners, etc. – rather than for things that grow these businesses. Many high yield companies are not generating much, if any, free cash flow and are dependent on the ability to roll over their debt." .. Booth: "As for the much bigger investment grade (IG) market, it’s not an energy story but rather one entangling the financial sector that promises to capture headlines in the coming months. S&P Managing Director Dianne Vazza recently warned that financials dominate the fallen angel universe, as in IG firms likely to be downgraded to high yield. The culprits include their exposure to energy firms, the fallout from municipal mayhem in Puerto Rico and weakness in global growth."LINK HERE to the essay

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